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John Auer of American Strategic Insurance: “The Value of Innovation Exceeds the Cost of a Few Mistakes.”

President and CEO John F. Auer joined ASI Corp. in 1997 to lead the new insurer in providing a voluntary market for residential property insurance. He previously served as Vice President of Product Management and Corporate Planning at Bankers Insurance Group and as a Division Controller at Crum and Forster Personal Insurance. John began his insurance career in 1976 as an Internal Auditor with State Farm Mutual Insurance Company.

Headquartered in St. Petersburg, Florida, ASI is the 18th largest homeowners carrier in America, specializing in personal and commercial property insurance, personal umbrella insurance, and primary and excess flood insurance. ASI offers coverage in 26 states plus the District of Columbia, with plans to offer coverage countrywide by 2017. ASI has in excess of $1 billion in premiums written and more than $550 million in policyholders’ surplus. For more information: www.americanstrategic.com.

“Innovations in Insurance”is an Enservio Q&A that interviews thought leaders working to improve the quality of work while managing change within their organizations.

Can you cite a good example of innovation in our industry with respect to property?

There are two categories we can cite. One is underwriting and pricing, and the other is claims. When we started our business 17 years ago, I felt that property pricing was in the dark ages compared to auto pricing. With auto, insurers know the age and driving record of the driver, the make and model of the vehicle as well as the home address. Property pricing is far more subjective. However, today we’re seeing more and more credible data that give us characteristics of both the property and the individuals that inhabit the house. We can use that data to both price and evaluate property risk more effectively.

We use Data Prefill, which works like the Google Chrome browser to auto-fill blanks in a form such as name and address, etc. Not all carriers use it. It makes it easier and faster for the agent to write the policy because instead of them having to fill out all the information, we do it for them. This ensures that we’re both looking at the right house. This kind of accurate data availability on both homes and individuals helps us tremendously. Auto is still ahead of property, but property is closing the gap rapidly.

From a claims standpoint, innovation is about finding faster ways to handle claims, restore the property, and accurately evaluate the damage. One example is the use of satellite imaging to settle claims more quickly.

What does “to innovate” mean to you? What jumps out?

We try to innovate in all aspects of our business, from pricing, underwriting, policy issuance, and the claims process. Another important aspect is contract language. It seems that there’s never a shortage of attorneys or public adjustors trying to find ways to extort money from the insurance policy for things that were never intended in the first place. This kind of in-fighting raises everybody’s rates. It’s a constant battle to keep the contract paying for what it was intended for while squeezing out the unintended payments. We’ve seen many absurd cases. For example, a tiny chip in a single tile can lead to a $100,000 claim because that one tile allegedly cannot be matched, which leads to a request to replace all the kitchen cabinets. Improvement is an on-going process. We have to scrutinize the policy to close any perceived loopholes.

Where do you see the future of innovation going?

We’re always striving to find ways to simply do things better. Improving the blocking and tackling, the basics of the business. We see more and more online quoting. Customers are going online for rate quotes, so we’re working on that. We are also pushing electronic policy distribution. It saves trees and is more efficient. To the extent that we can get customers to agree to accept the policies electronically as opposed to sending paper, we think that’s a win-win. We give customers a credit for that. It’s certainly moving the industry in the right direction.

We’re constantly trying to use better technology to make it easier for agents to write policies with us; to make sure we have more accurate data, and to keep pricing right. We also want to make certain the policy language in our contracts is bullet-proof and pays for what it was intended to pay for.

What should companies do to cultivate a culture of innovation?

It’s important to talk about innovation and emphasize it, to make sure that employees understand its importance. I like to say how our company name ASI stands for Attitude, Speed and Innovation. We want to be on the cutting edge and be the first-to-market with products. Speed and innovation go together yet speed can incur costs. Sometimes you do something that you wish you hadn’t, or it costs a little bit, but we believe the value of innovation exceeds the cost of a few mistakes. We’ll accept a few mistakes as a trade-off to being the first-to-market and staying ahead of the competition. In our company we talk a lot about how we maintain our culture. The main thing is that we don’t take it for granted. You have to concentrate on culture, talk about it, and engrain it into your way of life.